NIKKEI225 Recovers Some Ground Yen Stable After Ishiba U-Turn Comments

Newly elected leader of the LDP, makes comments in an interview on Sunday that call for a more accommodative stance.

Shigeru Ishiba was elected on Friday as the Liberal Democratic Party leader and is known for his hawkish opinion on central bank policy. The new party leader is set to become the new prime minister tomorrow.

However, Ishiba made comments to public broadcaster NHK that seem to show a dovish turn. While in the past Ishiba had been critical of BoJ’s monetary easing policies, in the interview he expressed the need to accommodate policy to prop up a fragile economy.

“From the government’s standpoint, monetary policy must remain accommodative as a trend given current economic conditions,” he told the broadcaster.

When asked further about rate hikes he added “It’s something the Bank of Japan, which is mandated to achieve price stability, will decide while working closely with the government.”

The NIKKEI225 is up 1.9% today, after Friday’s drop of 5.4%, as the market takes the view that BoJ’s tightening policy may take a slower pace. The yen stopped its rally today, the USD/JPY is up 0.10% during the London session.

The 2-year JGB auction, which is particularly sensitive to short-term movements in central bank policy, came in lower than the last at 0.385% compared to 0.392%.

Housing starts showed a stronger than expected decline of 5.1% compared to forecasts of -3%. Indicating a possible weakness in economic growth. In contrast, Construction orders jumped 8.7%, with analysts expecting an increase of 5.3%.